Restrictive Covenants | Non-Competition

A restrictive covenant, sometimes called a non-competition agreement, is an agreement saying that the person bound agrees not to do something ... a negative covenant. Sometimes it is designed to limit competition but there can be other purposes as well. Drafted properly, it may be enforceable. However, if drafted improperly, it may be entirely unenforceable.

Common Types of Restrictive Covenants

Restrictive Covenants can be found in many types of agreements. Some examples include:

Sale of Business Agreements, where the clause is designed to help the buyer get the full advantage of the business purchased without having to worry about the seller setting up a competing business nearby.

Employment Agreements ... although the enforcability of these types of clauses is limited.

Restrictive Covenants registered against land to protect one parcel of land from having to face competition from business to be conducted on another parcel of land.

Restrictive Covenants in commercial leases designed to ensure that a tenant operating a business in a mall will not need to worry about the landlord putting another competing business in the same mall.

Restrictive Covenants registered against land setting out guidlines how a property must be developed to ensure uniformity of appearance and appeal in a neighbourhood.

Enforcability

The law has guidelines that restrictive covenants must meet in order to be enforceable. You won't find these guidelines in a piece of legislation giving you a list of points to follow. Instead, the rules can only be understood by reading many court decisions.

If an agreement attempts to do more than the law permits, or especially in the case of land, if the required elements are not present, the law will not lend a hand to repair the problem. The offending clause in an agreement will typically be void (invalid).

Contact me if you need help in drafting a restrictive covenant agreement or if you need help reviewing an existing agreement.

Notice: The information on this website is general in
nature only. It relates to Saskatchewan, Canada and may not be
applicable in your jurisdiction. It does not constitute legal
advice to you and no solicitor client relationship will be established.
You should seek specific legal advice regarding your circumstances
from a lawyer entitled to practise law in your jurisdiction.